by Paul Davidson, USA TODAY

by Paul Davidson, USA TODAY

It's finally official: Ben Bernanke, one of the most influential Fed chairmen in history, will step down on Jan. 31 when his second term ends.

President Obama's nomination of Janet Yellen Wednesday to be the next Fed chair ends months of speculation about who will lead the Fed next year. It will likely set off a cascade of tributes, as well as some criticism, of Bernanke, a shy and self-effacing former Princeton professor. He boldly led the U.S. economy through the worst financial crisis since the Great Depression and spearheaded communication policies that have made the Fed more transparent to financial markets.

"When faced with potential global economic meltdown, he has displayed tremendous courage and creativity," said Obama, flanked by Bernanke and Yellen, at a news conference. "He took bold action that was needed to avert another Depression."

Bernanke also has been assailed for failing to spot the housing bubble and for easy-money policies that could be sowing the seeds for eventual high inflation.

Bernanke, 59, grew up in tiny Dillon, S.C., the son of a pharmacist and a school teacher. He eventually became perhaps the foremost scholar on the Great Depression, immersing himself in the subject as an economics doctoral student at the Massachusetts Institute of Technology.

His study proved valuable when the housing crash and financial crisis froze credit markets in late 2008 and threatened to send the economy into a depression. The Fed acted swiftly, rolling out an armada of innovative products aimed at providing cash for banks to lend to consumers and businesses. With short-term interest rates near zero, the Fed also launched unprecedented purchases of Treasury bonds and mortgage-backed securities to push down long-term interest rates for home buyers and others.

"It felt like the institution turned on a dime," says Barclays Capital economist Michael Gapen, who headed a Fed monetary affairs unit at the time. The philosophy: "Let's try it and see if it works, and if it doesn't, we'll try something else."

Bernanke has been uniquely suited to the task. "Given his experience and research, he was able to quickly figure out the channels through which (Fed liquidity programs) would spill into the real economy," says New York University economics professor Michael Gertler, who has collaborated with Bernanke on economic papers. "This was like brain surgery, and you needed an expert to do it."

Bernanke is criticized for not raising interest rates quickly enough or cracking down on questionable mortgages to head off the crisis as the housing bubble formed.

"I'm sure he wishes he had a sense ahead of time what was going on with subprime mortgages" and a shadow banking system that was bundling the mortgages into securities, Gertler says. He adds, however, that the vast majority of economists similarly failed to foresee the meltdown.

More recently, Bernanke has been castigated by some economists for continuing Fed purchases of Treasury and mortgage bonds the past year. With interest rates already near zero, they worry about high inflation if the Fed can't move deftly enough to shrink its portfolio as the economy heats up.

Bernanke also has brought more transparency to a Fed policymaking committee that previously was the mirror image of the often inscrutable former Fed chairman Alan Greenspan. Fed policymakers have vowed not to raise its benchmark short-term interest rate at least until unemployment - now 7.3% - falls to 6.5%, assuming inflation is stable. Bernanke began holding quarterly press conferences in 2011.

"I think he has made (the Fed's policymaking committee) more accountable to the public," says Richard Moody, chief economist for Regions Financial.

The detailed communication, though, has sometimes befuddled investors. Many investors, for example, expect the Fed to hike short-term rates when the jobless rate hits 6.5% - but that may not happen if unemployment is falling because Americans are giving up their job searches. "People are finding it very confusing," says Tim Duy, a University of Oregon economics professor and author of the Fed Watch blog.

Before last month's Fed meeting, financial markets interpreted the remarks of Fed officials as signals that the central bank would pare back its $85 billion in monthly bond purchases. They were stunned when the Fed maintained the bond-buying. A big reason it did is that Bernanke's earlier remarks that the stimulus soon would be tapered pushed up interest rates, damping the housing recovery.

At a news conference, Bernanke rejected the suggestion that the Fed should be less forthcoming. "I think there's no alternative in making monetary policy but to communicate as clearly as possible, and that's what we try to do," he said.

Gertler says Bernanke would prefer to leave office with the economy firing on all cylinders and the stimulus wound down. But noting that Bernanke has endured unparalleled stress among postwar domestic policymakers, Gertler said: "In his mind, he did everything he could."